The Banker’s Ranking of the Top 100 International Bank



An Overview of the World’s Largest Banks

By Hugh Thomas

I am grateful to James Ma Kwok Wai for able assistance in constructing the tables used in this paper. This is a first draft. Please contact the author at hugh-thomas@cuhk.edu.hk with corrections, comments and suggestions for improvement.

Banks provides the world with liquidity – the ability to exchange ownership claims with minimal cost. When we lend money to non-financial corporations, we are conscious of lending. But when depositors lend money to banks, they believe that they have “money in the bank”. Banks debts are defined as society’s money – the most liquid asset most members of society can hold. To make payments using bank deposits, customers must access the payments system through banks.

Banking is defined in law and regulated by the national governments of the world. Most jurisdictions define banks as those institutions that take deposits and make payments on behalf of customers through payments systems. In some jurisdictions, banks are also defined by their lending power.

In addition to providing legally defined banking services, banks lend, manage financial assets, and make and service markets. They provide trust and investment banking services – underwriting, issuing, and making markets in securities and advising companies as to how they should tap and invest in the money and capital markets. Some banks also underwrite and distribute life and general risk insurance. In playing these diverse roles, banks are regulated by banking, securities markets, insurance and pension fund regulators. The critical nature of banking services and the high degree of government regulation leads customers to believe that the obligations of banks – especially the largest banks – are implicitly (if not explicitly) guaranteed by governments. This assumption, in turn, feeds the need for regulation.

Banks’ liquidity, market making, market servicing, information processing and other intermediation services evidence large economies of scale. The importance of reputation in provision of these services and the implicit government guarantees of the largest banks increases further their scale economies. Thus it is not surprising that concentration in banking worldwide is very high. In most countries, a handful of very large banks dominate.

Table 1 shows the ranking of the 100 largest banks by book value of equity capital. These 100 banks include over 67 percent of the world’s banking assets [measured by the assets of the world’s largest 1000 banks]. Within the top 100 banks, there is also substantial concentration, with the top 20 banks accounting for 50 percent of profit and 45 percent of the aggregate assets and capital. Bank concentration is likely to increase in future as national boundaries to the flow of capital decrease and nationally fragmented institutions, markets and instruments succumb to globalization.

Table 1: The 100 Largest Banks in the World by the Book Value of Equity Capital

|Rank |

| |

| |US$ billion |% | | | |

|Loan Loss Reserve / Gross Loans |1.9 |1.9 |1.8 |1.9 |3.1 |

|Impaired Loans / Gross Loans |1.5 |1.3 |2.4 |1.5 |4.0 |

| | | | | | |

|Basel Tier 1 Capital / Risk Assets |11.8 |8.7 |6.2 |8.9 |7.9 |

|Equity / Total Assets |2.3 |7.5 |3.6 |7.8 |5.3 |

|Profitability and Efficiency | | | | | |

|Return On Average Equity |21.3 |15.6 |14.4 |13.9 |8.5 |

|Expense Ratio |73.3 |65.4 |56.9 |53.9 |72.1 |

|Liquidity | | | | | |

|Net Loans / Deposits & Short-term Funding |22.7 |73.7 |57.7 |76.4 |68.4 |

Note: · Names of banks included in computing the territorial averages are included in appendix 2

· Definition of ratios are included in append 3

APPENDIX 1:DEFINITION OF ACCOUNTS

Liquid Assets

Cash and Due from Banks

Deposits with Banks

Due from Central Banks

Due from Other Banks

Due from Other Credit Institutions

Trading Securities

Government Securities

Other Bills

CDs

Treasury Bills

Other Assets

Listed Securities

Equity Investments

Investment Securities

Non-Listed Securities

Other Securities

Bonds

Other Investments

Deferred Tax Receivable

Other Non Earning Assets

Intangible Assets

Loans, Net

HP / Lease

Loans to Other Corporate

Loans to Group Companies / Associates

Mortgages

Loans to Municipalities / Government

Loans to Banks

Trust Account Lending

Other Loans

Overdue Loans

Restructured Loans

Other non-performing Loans

Loan Loss Reserves

Loan Loss Reserves (Previously Deducted)

Fixed Assets

Land and Buildings

Other Tangible Assets

Deposits & Short-term Funding

Deposits - Demand

Deposits - Savings

Banks Deposits

Municipalities / Government Deposits

Other Deposits

Certificates of Deposit

Debt Securities

Commercial Paper

Mortgage Bonds

Convertible Bonds

Other Negotiable Instruments

Other Securities

Other Bonds

Other Funding

Other Liabilities

Other Liabilities

Subordinated Debt

Other Non-equity Reserves

General Loan Loss Reserves

Total Equity

Hybrid Capital

Minority Interests

General Banking Risk

Preference Shares

Common Shares

Other Equity Reserves

Retained Earnings

Net Interest Revenue

Interest Received

Interest and dividends on debt securities

Interest received

Other dividend income

Interest Paid

Interest paid

Other Operating Income

Fees and commissions receivable

fees and commissions payable

Foreign exchange trading

Securities trading

Other / Derivatives trading

Sundry operating income

Investment securities gains

Other non-banking income

Overheads

Personnel Expenses

Amounts written off fixed asset investments

Other non-interest expenses

Depreciation

Provisions for contingencies and commitments

Loan Loss Provisions

Specific loan loss provision

General loan loss provision

Other

Income from associates

APPENDIX 2: NAME OF BANKS INCLUDED IN THE COMPUTATION OF REGIONAL AVERAGES

Name of Banks Included in the Computation of Regional Averages:

China

Bank of China

China Construction Bank

Industrial and Commmerical Bank of China

Agricultural Bank of China

Japan

Mitsubishi Tokyo Financial Group

Mizuho Financial Group

Sumitomo Mitsui Financial Group

UFJ Holdings

Norinchukin Bank

Resona Holdings

Sumitomo Trust & Banking

Shinkin Central Bank

Shoko Chukin Bank

Mitsui Trust Holdings

Rest of Asia

HSBC Holdings PLC

State Bank of India

Kookmin Bank

DBS Bank

Europe

Erste Bank

Fortis Bank

Dexia

KBC Bank

Danske Bank

Nykredit Group

Credit Agricole

BNP Paribas

Groupe Caisse d'Epargne

Societe Generale

Groupe Banques Populaires

Deutsche Bank AG

HypoVereinsbank

Commerzbank

Bayerische Landesbank

DZ Bank Deutsche Zentral-Genossenschaftsbank

Landesbank Baden-Wurttemberg

Dresdner Bank

HSH Nordbank

Eurohypo

Norddeutsche Landesbank Girozentrale

Allied Irish Banks

Bank of Ireland

Banca Intesa

UniCredito Italiano

SanPaolo IMI

Capitalia Gruppo Bancario

Banca Monte dei Paschi di Siena

BNL-Banca Nazionale del Lavoro

ABN AMRO Bank

Rabobank Group

ING Bank

DnB NOR Group

Santander Central Hispano

Banco Bilbao Vizcaya Argentaria

Caja de Ahorros y Pen. De Barcelona - la Caixa

Caja de Ahorros y Pen. De Barcelona - la Madrid

Banco Popular Espanol

Nordea Group

Svenska Handelsbanken

Skandinaviska Enskilda Banken

ForeningsSparbanken (Swedbank)

UBS

Credit Suisse Group

Royal Bank of Scotland

HBOS

Barclays Bank

Lloyds TSB Group

Standard Chartered

North America

Scotiabank

Royal Bank of Canada

Bank of Montreal

Toronto-Dominion Bank

Canadian Imperial Bank of Commerce

Citigroup

JP Morgan Chase & Co.

Bank of America Corp

Wells Fargo & Co.

Wachovia Corporation

Washington Mutual

U.S. Bancorp

MBNA Corp

Countrywide Financial Corporation

National City Corp

SunTrust Banks

Fifth Third Bancorp

Capital One Financial Corporation

Golden West Financial Group

KeyCorp

BB & T Corp

Bank of New York

Regions Financial Corp

PNC Financial Service Group

Desjardins Group

Australia

National Australia Bank

ANZ Banking Group

Commonwealth Bank Group

Westpac Banking Corporation

(Note: 4 of the top 100 institutions, including Credit Mutuel of France, Metlife and John Hancock of the U.S.A., Banco Itau Holding Financeira of Brazil, as listed in The Banker’s survey have been excluded in the computation due to unavailability of detailed information

APPENDIX 3: DEFINITIONS OF RATIOS

Asset Quality

Loan Loss Reserve / Gross Loans = [pic]

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Capital Adequacy

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Profitability and Efficiency

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Liquidity

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[1] The Basel Accord definition of core equity capital for minimum regulatory capital requirements being the sum of common shareholders' equity common shares, contributed surplus, retained earnings, non-cumulative preferred shares plus minority interests in subsidiaries from Tier 1 capital minus goodwill.

[2] Bankscope is a comprehensive, global database containing financial information on 24,000 public and private banks from around the world. It combines data from the main information provider, Fitch Ratings, and 6 other sources, with software for searching and analysis.

[3] The 1988 Capital Accord, entitled “Basel Committee on Banking Supervision. International convergence of

capital measurement and capital standards” and subsequent amendments, is frequently referred to collectively as Basel I. In June 2004 the Basel committee released “International convergence of capital measurement and capital standards: a revised framework” informally called Basel II.

[4] Risk weighting calculates the amount of credit risk exposure the bank is deemed to face by Basel from a total position. The amount is calculated by weighting the value of each asset by its regulatory risk weighting. For example, under Basel I own-government obligations are risk weighted zero, interbank loans are risk-weighted 20 percent, retail mortgage loans are risk weighted 50 percent and other on balance sheet assets 100 percent.  Off-balance sheet exposures are weighted to calculate a credit equivalent amount and then risk weighted.     

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